The expectation that rates will rise to 4.75 or 5 per cent is already priced into the money markets, which are at 5.19 per cent now. If the market priced in a move of, say, 6 per cent, which is nearly a 50 per cent rise, the fixed rate market would become much more expensive,” said Goodfellow.
He added: “The Bank of England rate rise has only taken us back to the same level as November 2001. I predict further rate rises will occur throughout 2004, but Skipton’s view is that, even with rates at 5 per cent, the housing market will only cool slightly.”
HSBC is expected to announce that it will leave its mortgage rates unchanged, unlike rival lenders Abbey, Halifax, Nationwide and Northern Rock, who wasted no time last Thursday in hiking their variable rates as soon as the Bank of England’s widely-expected verdict was confirmed.
Ben Thompson, director of Clear Cut Mortgage Solutions, said: “Before the MPC announcement, longer-term, fixed rate deals represented good value compared to short-term deals.”
He added: “However, money market rates currently indicate that rates are unlikely to rise significantly, meaning a two-year rate could prove better, enabling advisers to switch clients to a new rate after two years.”
